AmResearch: No more OPR hike over the next 3 – 6 months

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KUALA LUMPUR: Bank Negara Malaysia is likely to pause rates again at its next meeting on November 12, says senior economist at AmResearch Sdn Bhd, Manokaran Mottain.

“Wi th Bank Negar a having frontloaded rate hikes in the earlier part of the year, we see greater fl exibility in keeping to a neutral stance.

“In our opinion, there will be no more hikes over the next three to six months,” he said in an economic update report yesterday.

The central bank at its last meeting in September, held the overnight policy rate (OPR) steady at 2.75 per cent.

Bank Negara Governor, Tan Sri Dr Zeti Akhtar Aziz had cautioned on Tuesday that the central bank would not hesitate to intervene in the currency market, if movements in the ringgit became ‘disorderly’. The ringgit yesterday’s morning, traded at RM3.10 against the US$1 compared with RM3.094 on Tuesday’s closing.

Year-to-date, the local unit has strengthened nearly 10.5 per cent against the US dollar, as investors pump cash into higher-yielding emerging market assets.

“More and more emerging countries are beginning to tighten the noose around speculative activities, as inflow of hot money can cause their currencies to appr e c iat e beyond fundamentals, damaging competitiveness.

“We do not think Bank Negara will resort to any more capital controls, as it will certainly affect investor confi dence, at a time when we are attempting to lure foreign direct investments,” Manokaran added.

Instead of capital controls, Malaysia, he said, could strengthen the financialmarket and its reserves while adopting a firmer policy to deter speculative activities in the property market such as putting a cap on the third housing loan, or tightening rules on foreigners purchasing residential properties.

This, he explained, could likely discourage the infl ow of hot money and the creation of a bubble in certain asset classes.

“The central bank may have to consider unorthodox counter-cyclical measures, even if it means a rate cut,” he said.

He highlighted that recent data showed inf lat ion moderating to 1.8 per cent in September, from 2.1 per cent in August, and this further supported Bank Negara’s fl exibility in containing any asset bubble in the system. — Bernama